How Channel Partners Monetize Vendor Relationships
"Who needs you?"
While it may sound curt, maybe even nasty, this is an important question to ask yourself when determining which of your vendor partners you can best leverage to generate new revenue.
While your instinct may be to focus on your largest vendors, you may find that your smallest vendors need you more and are willing to invest more in your mutual success. You may have to be more creative, innovative and aggressive about developing marketing strategies in partnership with them, but it will pay back in significant new revenues, new ongoing customer relationships, and new advantages with what you will come to realize are your best, most effective vendor partnerships.
How It Works When Done Correctly
Many years ago, a new vendor representative walked into my office and said something to me that no other vendor had ever said before.
The rep said he had a problem that I might be able to help him with. His problem was that he had a customer in my city that wanted to buy his software product, but he had nobody in town that could sell or install it.
Since his company had a "thru-partner-only" strategy, he needed to identify a qualified reseller to do the work, and he had heard that my company was very capable. The rep said that, if we were interested, he'd gladly have one of my people trained and would even provide sales training.
To this day, I still wonder if I was just the rep's first stop that day. Wouldn't anyone say "yes" to that proposal?
This is clearly the most direct way in which vendor-partners convey high value to their channel partners. Their own business development efforts generate leads, which are geographically distributed.
In contrast, some channel representatives will make first calls, introduce themselves, and then decide which partners would be the best fit for this customer. When I was running Business Development & Marketing, I would actively seek out such reps and focus more of my relationship-building on them. Demonstrating and clarifying our superior features and capabilities to them often turned into more incremental business—much more.
Getting Paid to Install and Service Products
Many vendors recognized that the presence of competent installers and servicers was uneven. So they actively recruited capable service-only providers and would pay them to install and service their products, which were sold by their direct sales force or by other channel partners.
Other vendors created enterprise-level sales agreements that included "credits" or "vouchers" that customers could use to pay for required services from authorized channel partners. Many partners have found it very lucrative to make these vendors their best sources of new business.
In some cases, these vendors have become the source of the majority of some partners' businesses, leveraging credits and vouchers to produce the lion's share of their revenue. The danger in this, as many partners have found out, is that some vendors don't recognize the smaller nature of their partners' companies and persist in paying exceedingly slowly. This can be severely damaging to cash flow in businesses that depend heavily upon a healthy cash flow.
Also, a change in representatives due to promotions, resignations or terminations often results in successful partners losing their lifelines to this ongoing business when the new representative prefers to use other partners. When that happens, these partners often have to scramble to find new business, since they haven't been actively marketing for what is frequently a substantial period of time.
Vendors can be an awesome source of new, already closed business. Just go into it with your eyes open, and never let your business depend solely upon it.
Going to Market Together
Marketing Development Funds (MDFs) and Co-operative Marketing Funds have been part of the vendor-partner relationship for decades. There are several ways in which vendors provide funding and other support for marketing activities. Some are calculated as a percentage of sales accomplished. Others are apportioned based on a periodic business review.
A number of vendors, however, take a much more informed approach. Some make it part of their program, while others don't tell you about it; They just wait for those who take the initiative to ask. In these cases, the vendor will consider a well-written, well-thought-out proposal for a specific, innovative new marketing campaign or activity, and will offer a specific dollar contribution to the execution of it. In some cases, vendors may require a percentage match of funds from the proposing channel partner.
Can I Tell You How to Market?
Welcome to the Danger Zone.
Many vendors have been frustrated by the failure of co-operative marketing ventures with partners to produce sufficient new revenue for them. Many thought raising ROI demands for their marketing investments to 50x, 300x, or more would motivate greater sales production. They were wrong.
Most recently, many larger vendors have developed well-defined marketing programs that they offer to channel partners. There have been several challenges with this approach, and three are described below.
- The marketing resources the vendors engage to produce these programs often have no familiarity with the partner channel or how it operates. As a result, channel partners find themselves educating these companies, sometimes extensively, and often with no ROI for their time, effort and matching funds.
Before you invest any matching funds, interview the program provider to determine if they understand your business and can give you qualified leads. Stay focused on the cost-per-lead and make sure it justifies the anticipated ROI.
- A number of channel partners have been frustrated by the fact that many of these prepackaged programs promote the vendor's products, but not the partner's service superiority. Some allow only the embossing of the partner's logo and location information on the collateral. Look for vendors that will incorporate your service messaging into the program and highlight it.
- Some overzealous vendors, especially those with multiple business units, have inundated partners with too many programs that run simultaneously. Most partners lack the extensive marketing and business development departments required to work with the program providers, some of whom require extensive support.
Let's Be Realistic Together
In the earliest days of vendor-channel relationships, there were many abusers who simply planned ways to drain marketing funds from vendors. This ultimately damaged the relationships, the programs and the ways they served the channel. While abuses certainly still exist, closer relationships between vendors and their chosen channel partners have created an environment in which both can enjoy significantly increased income.
If you're currently measuring the success of your business development and marketing effort by how many marketing fund dollars you're extracting from vendors, stop! Then think about it. The element that will perpetuate and grow your cooperative marketing efforts is the revenue that you generate, which benefits both the vendor and channel partners.
Don't wait for vendors to demand and then measure ROI. Track ROI yourself and focus on vendors with which you generate the most revenue. That's the real measure of how well you monetize your vendors.